Information Technology (IT) industries can be an important source of economic growth in developing countries. The Indian software industry is an exemplar. NASSCOM, the Indian software services industry association, estimates that the Indian IT industry grew nearly eight-fold from 1994 to 2001, with revenues in 2001 of approximately $13.5 billion and a 2.87% share of India’s GDP. India has been successful in part because the software services sector requires highly skilled labor, but relatively little capital. India’s software services are primarily exported to U.S. customers; therefore, its prospects depend heavily on U.S. IT demand.[1] If this demand continues to stagnate, two issues will become increasingly important: international labor mobility and product differentiation. Stagnant demand makes the IT services market more competitive, and supplier growth requires increasing market share.
